Rhinebeck Bancorp(RBKB) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents Rhinebeck Bancorp's unaudited consolidated financial statements for Q3 and YTD September 30, 2019, including key financial statements and notes Consolidated Statements of Financial Condition Total assets grew to $946.0 million by September 30, 2019, driven by net loan growth, and stockholders' equity rose to $108.3 million Consolidated Statements of Financial Condition (in thousands) | Account | September 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and due from banks | $18,356 | $50,590 | | Available for sale securities | $115,705 | $101,312 | | Loans receivable, net | $758,999 | $678,402 | | Total assets | $946,027 | $882,423 | | Liabilities | | | | Total deposits | $769,985 | $684,418 | | Advances from the FHLB | $47,936 | $31,598 | | Total liabilities | $837,772 | $823,146 | | Stockholders' Equity | | | | Total stockholders' equity | $108,255 | $59,277 | | Total liabilities and stockholders' equity | $946,027 | $882,423 | Consolidated Statements of Income Net income for Q3 2019 increased to $2.1 million, and for the nine months to $4.2 million, driven by higher net interest income Consolidated Income Statement Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $8,464 | $7,730 | $23,955 | $20,889 | | Provision for loan losses | $450 | $525 | $2,010 | $1,575 | | Noninterest income | $1,459 | $1,498 | $4,156 | $3,630 | | Noninterest expense | $6,832 | $6,473 | $20,798 | $19,240 | | Net income | $2,091 | $1,964 | $4,223 | $3,159 | | Basic EPS | $0.20 | N/A | $0.39 | N/A | Consolidated Statements of Comprehensive Income Total comprehensive income for Q3 2019 was $2.5 million, and for nine months $7.3 million, driven by unrealized gains on available-for-sale securities Comprehensive Income (in thousands) | Metric | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net Income | $2,091 | $4,223 | | Other comprehensive income (loss) | $422 | $3,079 | | Total Comprehensive Income | $2,513 | $7,302 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $108.3 million by September 30, 2019, driven by a $45.9 million common stock offering and retained earnings - Total stockholders' equity grew from $59,277 thousand at December 31, 2018 to $108,255 thousand at September 30, 2019[16] - Key drivers of the increase were the common stock offering (adding $45,865 thousand), net income ($4,223 thousand), and other comprehensive income ($3,079 thousand)[16] Consolidated Statements of Cash Flows Net cash from operations was $7.2 million, investing activities used $94.6 million, and financing activities provided $55.2 million for the nine months Cash Flow Summary for Nine Months Ended Sep 30, 2019 (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,168 | $6,813 | | Net cash used in investing activities | ($94,624) | ($81,248) | | Net cash provided by financing activities | $55,222 | $76,571 | | Net (decrease) increase in cash | ($32,234) | $2,136 | Notes to Consolidated Financial Statements Details accounting policies, financial instruments, regulatory capital, and fair value measurements, including new accounting standards and ESOP establishment - The company adopted ASU 2017-04 for goodwill impairment testing and ASU 2018-07 for nonemployee share-based payments, neither of which had a material impact[27][28] - As an emerging growth company, the Company has elected to use the extended transition period for complying with new accounting standards, such as ASU 2016-13 (CECL), which is delayed to January 2023[26][30] - An Employee Stock Ownership Plan (ESOP) was established on January 1, 2019, and purchased 436,425 shares of company stock with a loan from the company[81] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, including a 7.2% asset increase to $946.0 million and higher net income, plus market risk, liquidity, and capital - Total assets increased by $63.6 million (7.2%) to $946.0 million at September 30, 2019, from December 31, 2018, primarily due to growth in the loan portfolio[132] - Net income for the nine months ended September 30, 2019, was $4.2 million, an increase from $3.2 million in the same period of 2018[142] - Stockholders' equity increased by $49.0 million to $108.3 million, mainly due to $45.7 million in proceeds from the common stock offering[140] - The net interest margin for the nine months ended September 30, 2019, was 3.80%, a slight decrease from 3.89% in the prior-year period[144][162] Comparison of Financial Condition Total assets increased 7.2% to $946.0 million, driven by 11.9% net loan growth, with deposits up 12.5% and equity surging to $108.3 million Key Balance Sheet Changes (Sep 30, 2019 vs. Dec 31, 2018) | Item | Change ($M) | Change (%) | | :--- | :--- | :--- | | Total Assets | +$63.6 | +7.2% | | Net Loans | +$80.6 | +11.9% | | - Indirect Automobile Loans | +$55.7 | +19.2% | | Deposits | +$85.6 | +12.5% | | Stockholders' Equity | +$49.0 | +82.7% | - Non-accrual loans increased by $3.1 million (54.7%) to $8.8 million during the first nine months of 2019[136] Comparison of Operating Results Net income for the nine months increased to $4.2 million, driven by a 14.7% rise in net interest income, partially offset by higher non-interest expenses Year-over-Year Changes for Nine Months Ended Sep 30 | Metric | 2019 ($M) | 2018 ($M) | Change ($M) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $24.0 | $20.9 | +$3.1 | +14.7% | | Provision for Loan Losses | $2.0 | $1.6 | +$0.4 | +27.6% | | Non-Interest Income | $4.2 | $3.6 | +$0.5 | +14.5% | | Non-Interest Expense | $20.8 | $19.2 | +$1.6 | +8.1% | | Net Income | $4.2 | $3.2 | +$1.0 | +33.4% | - The effective tax rate for the first nine months of 2019 was 20.4%, up from 14.7% in the same period of 2018[156] Management of Market Risk The company manages interest rate risk using an EVE model, with a 200 basis point rate increase estimated to decrease EVE by 9.0% within policy limits EVE Sensitivity Analysis at September 30, 2019 | Basis Point Change | Net Economic Value ($M) | Percent Change | | :--- | :--- | :--- | | +400 | $89.3 | -19.4% | | +200 | $100.9 | -9.0% | | 0 | $110.9 | 0.0% | | -100 | $105.3 | -5.1% | Liquidity and Capital Resources The company maintains strong liquidity through deposits and FHLB access, with $472.9 million available, and is categorized as "well capitalized" with all capital ratios met - Primary sources of liquidity include deposits, loan sales, amortization of loans and securities, and FHLB advances[173] - At September 30, 2019, the company had access to FHLB advances of up to $472.9 million, with $47.9 million outstanding[174] - The Bank met all capital adequacy requirements and was categorized as "well capitalized" by the FDIC[94][95] Item 3. Quantitative and Qualitative Disclosures About Market Risk Refers to the 'Management of Market Risk' section within Item 2 for detailed market risk disclosures - For information regarding market risk, see "Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operation- Management of Market Risk"[181] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal controls - Management concluded that the Company's disclosure controls and procedures were effective as of September 30, 2019[181] - No changes in the Company's internal controls over financial reporting occurred during the nine months ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, internal control[182] PART II. OTHER INFORMATION Item 1. Legal Proceedings As of September 30, 2019, no pending legal proceedings are expected to materially affect the company's financial condition or operations - As of September 30, 2019, the company was not a party to any pending legal proceedings that would have a material adverse effect on its financial condition, results of operations or cash flows[183] Item 1A. Risk Factors No material changes to the company's risk factors since the Annual Report on Form 10-K for December 31, 2018 - As of September 30, 2019, the risk factors of the Company have not changed materially from those disclosed in the Annual Report on Form 10‑K for the year ended December 31, 2018[184] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - None[185] Item 6. Exhibits Lists exhibits filed, including corporate governance documents, Sarbanes-Oxley certifications, and XBRL financial statements - Exhibits filed include corporate governance documents and Sarbanes-Oxley certifications (302 and 906)[191] - Financial statements and notes formatted in XBRL are also included as an exhibit[191]